A judge for the Superior Court of Quebec has approved a takeover proposal for Cirque du Soleil from its secured creditors, setting the stage for a potential auction for the insolvent entertainment company next month.
Justice Louis Gouin, who is overseeing Cirque’s bankruptcy protection proceedings in Canada, on Friday approved an offer valued at more than US$1.2-billion from the company’s debt holders. It will serve as what is called the stalking horse bid in the sales process, meaning any rival offer will have to be superior in value.
The creditor bid replaces a previous stalking horse bid made by Cirque’s current shareholders. Those shareholders, TPG Capital LP, Fosun Capital Group and Caisse de dépôt et placement du Québec, would be wiped out under the creditor proposal.
In addition to the creditor and shareholder proposals, Cirque has received four other non-binding preliminary offers to buy the company, according to the latest report from its court-appointed monitor, Ernst & Young.
Cirque’s financial advisers have set up an electronic data room for prospective buyers to view financial information and Cirque management has held virtual presentations for them in recent weeks, the report states.
Quebecor Inc., the Montreal-based telecom company, had expressed its interest in Cirque, but on Friday issued a news release stating it has pulled out of the process. The company “held lengthy discussions with the creditors’ advisors, Houlihan Lokey, until it was forced to end them by signing a non-disclosure agreement, at the request of the Cirque du Soleil,” it said without explaining why such an agreement would be inappropriate.
Pierre Karl Péladeau, Quebecor’s controlling shareholder, has publicly criticized the way Cirque has been managed over the years and had positioned Quebecor as a potential saviour for the circus troupe. The company said Friday it “remains eager to contribute to the Cirque’s turnaround and to leverage its experience, capital and Quebec identity to do so, in cooperation with the creditors.”
More than two dozen potential bidders signed confidentiality agreements to win the right to examine the financials of the cash-strapped company in the preliminary stages of the process, a source close to the proceedings has said.
Among them were U.S.-based investment banking firm Goldman Sachs Group and Feld Entertainment, a U.S.-based live show production company that began with the now-defunct Ringling Bros. and Barnum & Bailey Circus. It was not immediately clear whether the two companies were still in the mix.
The Globe has agreed to grant the source confidentiality because they were not authorized to speak on the matter publicly.
Guy Laliberté, founder of the Cirque du Soleil, said in May he would jump into the battle for the company and was in talks with undisclosed partners on a bid. On Friday, a spokeswoman for Mr. Laliberté did not provide any further information about his intentions.
Under the new stalking horse bid, lenders would inject US$375-million in new money into Cirque on top of what they are owed, according to Ernst & Young’s latest monitor report. Cirque’s debt would be reduced to US$300-million from US$1.1-billion as the creditor group takes full ownership.
Creditors have agreed to keep Cirque’s international headquarters in Montreal for at least five years. They also committed to setting up a US$15-million fund to pay laid-off employees and another US$5-million for contractors, according to the bid document. There is no government money in the proposal.
The creditors include Toronto-based Catalyst Capital Group Inc. and U.S. debt funds such as CBAM Partners, BlueMountain Capital Management LLC and Thomas H. Lee Partners. The group is owed most of Cirque’s secured debt.
Under the rules of the restructuring process, bidders now have until Aug.18 to submit fully funded offers that are a minimum of US$1.5-million higher than the creditor bid. If no other offers are received, the creditors will win control of the company.
Justice Gouin on Friday declined a request made by a lawyer for a group of second-lien lenders to extend the current sales process by two weeks, saying all interested potential bidders are already engaged in the process and have started their due diligence on Cirque.
“I will not stop the exercise,” Justice Gouin told participants in a hearing. “The train is going on and I won’t stop it.”
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